SUBJECT

Economic Assistance to Thailand—FY
1970

I. Recommendation:

That you approve the continuation in FY
1970 of the A.I.D. program in Thailand, consisting primarily of advisory
and financial support of Thai police and developmental measures to
prevent the growth of Communist insurgency in the North and Northeast,
at a total obligational level of approximately $30 million of grant
funds. No PL 480 assistance is
proposed.2

II. Issue: Political Interpretation of Reduced FY 1970 Program Level

Discussion:

We are nearing the time in our discussion with the Royal Thai Government
when we will be ready to make the major FY 1970 commitments in the A.I.D. program for Thailand.
Prior to this agreement, we are submitting this Country Memorandum
describing the program and the major policy issue for your
consideration.

As shown in the table below, our obligations in the Thailand program rose
to a peak of $53.3 million in FY 1967,
fell slightly to $46.7 million in FY
1968, and last year were only $35.5 million.

Our FY 1970 Congressional Request for the
Thailand program was $45 million. Due to Congressional action on our
request for funds, [Page 101]A.I.D.
expects to reduce many of its country programs this year. Because
Thailand competes with Vietnam for scarce supporting assistance funds,
we will not be able to provide the full FY 1970 amount originally proposed. Taking into account
funds still in the pipeline from prior year obligations, we believe our
FY 1970 program requirements can be
satisfied with up to $30.0 million: $22 million supporting assistance,
and $8.0 million technical assistance, including family planning. Our
assistance to Thailand plays a three-fold role by: (1) providing actual
resources to help carry out Thailand’s counterinsurgency effort; (2)
promoting greater Thai attention and resource allocation to
counterinsurgency measures and providing us an opportunity to influence
the direction of this Thai effort—the primary aim of our program; (3)
demonstrating continuing high-level interest in Thailand.

With respect to the above, we believe a program level of about $30.0
million essentially is adequate for the first two considerations.
However, a $30.0 million program will not completely satisfy the
third.

The Thais have become increasingly concerned that a Vietnam settlement
will affect adversely their own security. At the same time, they have a
growing doubt about the nature and extent of U.S. interest in Southeast
Asia in general and Thailand in particular. A.I.D. obligations for the
Thailand program are considered by the Thais as one indication of this
interest. Thus, anything less than last year’s obligation level of about
$35.5 million will raise questions in their minds about our commitment.
However, since a program of about $30.0 million is all our projects
usefully can absorb, a consideration understood by the Thais, we believe
adverse political reaction can be minimized and therefore are
recommending this program level for Presidential approval.

III. U.S. A.I.D. Objectives and Strategy:

Thailand’s importance to the U.S. lies in its key position in Southeast
Asia, its key role in the economic and political development of the
region, and its close cooperation with the U.S., particularly in support
of our Vietnam effort. The basic U.S. assistance objective is to improve
the Thai capacity for dealing with a Communist-supported insurgency
threat.

The primary purpose of our program is to try to get the Thais to devote
greater attention and allocate more resources to the security problem
than they would in the absence of our program. Since the Thais
contribute about $2 from their own budget for every U.S. dollar of
support to our joint projects, we exert influence not only through our
advisory assistance, but also directly upon their budget allocation
itself.

Both U.S. and Thai governments recognize that the fundamental
responsibility for countering this insurgency belongs to the Thais. We
[Page 102]have concentrated our
assistance in the North and Northeast of Thailand where incident rates
have been highest and conditions conducive to insurgency are most acute.
In combating the insurgency in other areas, the Royal Thai Government is
using the strategy developed in our joint programs in the North and
Northeast.

In dealing with the pressures of insurgency, Thailand has a number of
strengths—its history of national independence, a widely-respected Royal
Family, its well-established structure of government, and its strong
economy. However, its highly-centralized government does not yet provide
adequate channels for responding to local needs. Awareness and
understanding on the part of Thai Government officials of the needs and
aspirations of rural people and the increased commitment of resources
are essential to the solution of Thailand’s security problem. This
weakness, even more than limitations of Thai manpower and fiscal
resources, has been the greatest restraint on Thai Government efforts.
It is this problem which is the principal focus of the A.I.D.
program.

IV. Nature of Program:

Within the FY 1970 program, supporting
assistance funds will be used primarily to facilitate Thai efforts to
improve security in rural areas and to support Thai rural development
programs. Technical assistance will be used to assist in more broadly
developmental programs such as agriculture research and training, a
river basin survey, private sector development, and improvements in Thai
administration in civil service.

A. Rural Security

Against a $30.0 million program level, about $7.0 million of supporting
assistance is proposed in FY 1970 for
rural public safety programs. Our primary objective will be to help
develop a rural security capacity of sufficient strength and efficiency
to counter anticipated threats of communist terror and subversion to the
rural populace. A.I.D. will continue to equip the new township police
stations and vehicles and ammunition will be provided to the expanding
police forces in the villages and to the mobile backup units now being
manned.

B. Rural Development

The FY 1970 A.I.D. program includes about
$9.0 million for a number of rural development projects aimed primarily
at increasing the government’s responsiveness to village needs. This is
a major part of our counterinsurgency strategy and is accomplished by
providing advisory services and construction equipment to provincial
authorities for impact programs such as feeder roads and small
ponds.

A.I.D. also will help the Thais expand and improve their education and
health services in the North and Northeast as an important part of our
security-related program, and we are planning to provide about $9.0
million for these purposes. We will continue to support mobile training
units which provide vocational training to villagers as well as provide
advisory services to a major Thai and International Bank for
Reconstruction and Development (IBRD)
financed vocational education project. Similarly, A.I.D. will provide
commodities, advisory services, and participant training support to
Thailand’s rural health centers as well as its family planning
program.

D. Government Administration

Consistent with our aim of narrowing the gap between the villager and
government officials, A.I.D. support to in-service training will devote
particular attention to provincial and local officials, as well as
involve villagers in local self-government and project planning
techniques. Our program includes about $1.0 million for this
purpose.

E. Longer-Range Regional Development

To establish a more rational framework for allocating Thai and U.S.
resources to the development of the security-sensitive Northeast, we are
providing advisory assistance to the Thai Economic Planning Agency and
operating ministries in developing a plan for that area, and among other
activities also are helping finance a study of a river basin in
Northeast Thailand. We are planning to obligate about $4.0 million for
these activities, as well as for a few other projects such as private
sector development.

V. Planning for the Future:

While our program rationale has been under continual review, this year
the Agency will need to examine our program objectives and strategy for
Thailand even more closely to determine if they will be valid in the
near future. Our recent experience indicates the internal security
problem in Thailand, while real, is a longer-range problem than was
believed a few years ago. It does not pose an immediate threat to
Thailand’s political stability. This suggests that we should devote
increased attention to identifying and bringing about fundamental
changes in the political, social and economic conditions that foster
insurgency, while stressing less short-run impact activities. Our
strategy of concentrating our assistance in the North and Northeast of
Thailand also must be reconsidered in this context.

Further, the situation in Thailand is being examined to determine the
program implications of your statements at Guam and in the capitals of
Southeast Asia, as well as the Administration’s new Vietnam [Page 104]policy. We will need to consider the
program consequences of a postwar Vietnam settlement, with emphasis on
the proper balance between the Agency’s bilateral and regional
assistance programs.

The National Security Council study on Thailand, now in the final stage
of preparation, will address the major options open to the U.S. in our
relations to Thailand, as well as the program implications of these
options. This study will prove particularly useful to A.I.D. in
conducting our review of the Thailand program.

Our current year program will not be affected by these examinations. Some
program adjustments will be possible in FY 1971 and the FY 1972
presentation will take into full account the results of the current
examination.

WPR

Source: National Archives,
RG 59, Central Files 1970–73,
AID (US) THAI. Confidential. A covering January 13
memorandum from Hannah to Rogers, attached but not printed, indicates that
both memoranda were drafted by George K.
Pierson, Office Director for Southeast Asia, Bureau
of East Asia, Agency for International Development, and were cleared
by Green and Dexter, among others.↩

The approve option was checked
and a typewritten notation at the top of the first page reads: “The
President approved (Jack Murphy to jmj, 3/10/70).”↩

A $20.3 million loan was
authorized in 1965 and then deobligated in 1967 and
therefore is not shown in these figures. [Footnote in the
source text.]↩

A $20.3 million loan was
authorized in 1965 and then deobligated in 1967 and
therefore is not shown in these figures. [Footnote in the
source text.]↩